What would you think of a mortgage which is part of your current account and could, in part, be paid by the interest on your savings? It has certainly aroused lots of attention and the number of these mortgages has multiplied something like twenty times over a seven year period.
Offset mortgages are normally offered at very competitive rates and are usually very flexible. Because you can set the interest which you can gain on savings against the balance on your mortgage, there can be a worth-while saving on the overall cost of the mortgage. Another plus point is that if you want to overpay on your mortgage when you’re in funds and underpay from time to time, this shouldn’t be a problem.
Interest which you pay on income from money you’ve saved can be offset against your loan. Your mortgage is tied in with your current account and run “as one”. Each month you will receive a statement which shows mortgage balance, savings and your current account.
This type of mortgage is particularly appealing to the self employed. They can use money set aside for large occasional outgoings such as their tax bill to offset their mortgage. For others who are receiving large bonuses, and will have the money in the account for a reasonable period, it is an ideal arrangement, which means that they can reduce the interest on their mortgage, even though they will need to draw down on the money eventually. Those with significant savings would be well advised to look at the advantages of off-setting.
It should be noted that a lot of discipline in necessary when off-setting. The temptation of splashing the cash might be hard for some to resist and doing this too often would make the whole thing less advantageous. a variable-
So, off-set mortgages are probably not for everyone. If you haven’t got appreciable savings or large chunks of money coming in from time to time, the benefits are not really going to be useful to you. There are several other mortgage products around and if you need the re-assurance of knowing exactly what your monthly repayment is going to be, then a fixed-rate mortgage may be a better product for you.
If you can live with some degree of uncertainty, a discount mortgage is another option. Based on the lenders SVR, or standard variable rate, this tracks the Bank of England (BOE) base rate, plus a certain percentage of up to two percent. It broadly follows the rate, going up and down according the base rate. In actual fact, when the BOE’s rate rises, it goes up, but when it falls, the lender is not actually bound to apply the full reduction.
For a guaranteed base-rate tracker, that’s exactly what you could do with – a Tracker Mortgage. You pay a slightly lower rate of interest over and above base rate with this alternative, but it follows it exactly. It’s a gamble – a great deal when rates are low, but what goes down can come back up and catch you out.
What you probably need, above all, is some advice. The best way to do this is to ask an independent broker – just go on line and all the help you need is there. They’ll consider your needs and search the whole market for some comparative quotes to make sure you get the very best deal.
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